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Don’t rely on one-sided arbitration agreements

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in Human Resources

Arbitration agreements are supposed to help resolve employment disputes quickly and inexpensively. That’s true sometimes, but only if the agreement is fair.

If an employer tries to use arbitration as a way to avoid litigation by making it overly difficult for an employee to use the system, a court is likely to throw out the whole agreement as “unconscionable.”

That’s what the 3rd Circuit Court of Appeals did in one recent case.

Recent case: Rajae Nino went to work for The Jewelry Exchange as a salesperson and gemologist. Following a transfer to a new store, he was told he had to sign an arbitration agreement or he would not have a job. Nino signed, having already uprooted himself from out of state and having no other job prospects.

The arbitration agreement specified that employees had to file a written internal complaint with the employee’s immediate manager within five days of any alleged discrimination.

Then they had to wait for a response from the manager. If they disagreed, they had to appeal the decision within two days. If they disagreed with the appeal’s outcome, they had just five days to demand arbitration.

Plus, the employee had to pay half the arbitration costs.

Nino quit, saying he had been harassed for being gay and a Jordanian. He sued in federal court.

The company said the case should be sent to arbitration, where it presumably would be dismissed because Nino hadn’t followed the internal process’s short time frames.

Instead, the 3rd Circuit Court of Appeals threw out the arbitration agreement, calling it so one-sided that it seemed designed to prevent employees from ever challenging the company’s employment practices. (Nino v. The Jewelry Exchange, No. 09-1268, 3rd Cir., 2010)

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